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Is Worrying About Investing Unavoidable?

I was recently privileged to have a brief exchange on Twitter with Bob Seawright, financial adviser and author of the investing blog Above the Market.   In my view, Above the Market is one of the most insightful blogs about investor behavior.  Seawright is a genuine renaissance man who assembles wisdom from an incredibly diverse reading list to help his readers recognize their human foibles and become better investors.  What’s not to love about that?

Our Twitter exchange was about Seawright’s recent post, “Worried Faces“, where he notes that worry is an inescapable part of long-term investing.  Here’s the exchange:

 

Seawright agrees that mindfulness can help calm our investing worries, but he’s skeptical that we can elude “most” of those worries.  It’s a common viewpoint.  I thought it would be useful to gently rebut this viewpoint outside of Twitter, because I’ve rarely seen a productive discussion within the confines of social media.  Just in case you think I’m hiding from an open “debate”, I’ve sent a link of my post to Seawright.  I don’t really expect him to take time out of his busy day to reply in detail, but maybe he’ll find this interesting enough to chime in with some of his consistently astute observations.

Worry Is Unavoidable

At the risk of ruining the drama for you, let me start this “debate” by surrendering.  First, a Tweet or two can’t describe anyone’s full opinion.  Seawright may have some deep ideas about worry that I haven’t even considered.  So, I’ll use Seawright’s Tweets to represent a more generic skepticism about mindfulness and worry.  I can see many reasons for that skepticism, including that:

  • Seawright’s an experienced financial adviser who’s likely seen the worst of investor behaviors.  I imagine he’s repeatedly seen how hard it is to convince customers to stop worrying.
  • Skepticism is the logical result of two of the four cornerstones of mindful investing: empiricism and rationality.  Any reasonable person should be skeptical about a new and personally untested idea about investing.
  • Seawright has also likely seen a lot of snake oil peddled in the investing industry.  I suspect that most “new” investing products and ideas do more harm than good, while deftly moving some of the investor’s money into the peddler’s pocket.*
  • Seawright’s posts on investing behavior detail the many difficulties with breaking bad habits that I’ve also noted.  He’s read and summarized a lot of science showing how easily we gravitate toward certain cognitive biases and damaging behaviors.
  • Although I don’t know whether Seawright would fully agree, much of this science implies that we can’t avoid these biases and behaviors; nature seems to have “hardwired” them into our brains.

Couple all this with the practical concern that people often lack the discipline necessary to break bad habits such as over-spending, over-eating, drug addiction, a sedentary lifestyle, etc.  Just like going to the gym everyday, increasing your mindfulness requires regular meditation practice.  And given all those unused gym memberships, can we really expect people to diligently practice daily meditation just to improve their investing skills?

Worry Is Ephemeral

On the other hand, some key points are often overlooked in the rush to judge mindfulness as a way to minimize worry.  Here are some examples.

Is It Important? – We assume the things we worry about are important.  After all, why would we worry about ________ (fill in your favorite worry here), if we had already rationally determined that it was unimportant?  But in truth, we more often fail to rationally predetermine the importance or unimportance of our worries.  If you try to list everything you worried about this week, I think you’ll find that many of those things were pretty trivial.  A prime example is the baseball game that’s causing the “worried faces” in Seawright’s post.  Could anything be more trivial than worrying as form of entertainment?**

And even when our worries are important, they’re often less important that other things.  Imagine that you’re running five minutes late to a critical presentation.  You’ll probably spend that time worrying about how your tardiness will cause a bad first impression.  But if your presentation really impresses them, your audience will probably forget that you were late.  And if that’s true, wouldn’t the extra time before the presentation be better spent ensuring your main points are absolutely concise and convincing?  This simple example highlights what we already know is true.  Most worries are not only trivial but inherently unproductive.  So, couldn’t those pesky worries disperse and fade to some degree through purposeful concentration and reflection?

Isn’t Investing Important? – We all convinced ourselves a long time ago that losing money in the stock market (or anywhere else) would be a terrible tragedy.  But how tragic is that story?  If you lose half your money close to your retirement date, you might have to postpone your retirement or go back to work.  But your still alive.  You still have a fighting chance to make the rest of your life decent.  And if you’re a young investor, a 50% stock crash means even less.  You have many years to recover, and so far in history, U.S. stocks have always bounced back to ever greater highs as this graph from JPM Morgan illustrates nicely.

The graph also shows there are usually many years between market crashes, and the recoveries are often just as slow.  Many people (including me) have argued that successful long-term investing involves very few decisions and actions, which leaves a seemingly infinite amount of time to sit idly by and spin our elaborate stories of worry.  Instead of that drawn out process, imagine a stock market that lost 30 to 60% of its value every year and then recovered to an annual gain of around 8 to 10% by the end of every year.  Would you worry about investing in that stock market?  You would probably feel like a fool if you didn’t invest.

Of course, this fantasy is similar to the actual 150 year history of the U.S. stock market, it’s just that the stock market’s cycles occur over much longer and more variable periods, which leaves us plenty of time to weave our tales of worry.  Assuming you have a fairly long-term (at least 10 to 15 year) investing time frame, stock crashes aren’t that important most of the time.  I invested through the crashes of 2000 and 2008, but my stubborn unwillingness to give up still allowed me to retire early at the end of 2017.  From this perspective, most investing worries are mere figments of our short-term imaginations.  Or conversely, our worries spring from our inability to imagine long-term trends.

Is Anything Important? – Is there anything real and important enough to worry about?  Perhaps so.  But paradoxically, we usually fail to worry about those things.  Compare people’s worries about investing to their worries about driving.  Driving is the single most dangerous common activity for most of us.  The risks of dying or being severely injured in a car crash outweigh all other daily activities.  If you stop and think about it, each car trip is a literal gamble with your life.  But most people don’t worry about driving at all, and some people blithely increase their risk by driving distracted, too fast, or even intoxicated.  Instead of concentrating on driving, we spend that time in a haze of worry about the next stock market crash or something equally unimportant.  If we can routinely forget to worry about truly important things, how hard is it to believe that we could achieve a mental condition where we “forget” to worry about investing too?

Isn’t It Hard? – Perhaps after rational contemplation you’ll admit that most worries are petty and nearsighted.  And yet it still seems far-fetched that focusing on your breath for half-an-hour a day could somehow whisk away most of our worries.  Even though we can rationally dismiss most worries, the worries don’t seem to care.  They still pop up every time you close your eyes, or every time you click on CNBC.  Our worries often have a force and self-volition that feels irresistible.

As unbelievable as it may seem, many people routinely use mindfulness to improve health problems much more tangible, solid, and consequential than investing worries.  Mindfulness practice has been found to substantially reduce pain from major diseases like chronic lower back pain, fibromyalgia, and irritable bowel syndrome.  Mindfulness practice has also been found to improve symptoms or reduce stress and depression for people with serious diseases like cancer, asthma, diabetes, heart disease, HIV, hypertension, and various psychological disorders.  If you’re skeptical of these claims, note that the above links aren’t from random web pages; all of them lead to peer-reviewed science articles or lists of such articles.  Mindfulness-based pain and stress reduction programs are flourishing in the U.S., because patients find them successful.  Given that people use mindfulness to significantly reduce something as tangible as pain and decrease their worry and stress about something as serious as cancer, doesn’t reducing your trivial and unproductive worries about investing seem entirely possible in comparison?

Aren’t We “Hardwired” to Worry? – We’re often intimidated by all the science showing how hard it is to change our habits or overcome cognitive biases.  In Western culture, we like to think that the brain is an organic computer made of electrified jelly, which runs software encoded by our genes and life experiences.  The computer determines our actions and feelings.  But many Eastern and Native American cultures view the mind and reality as fluid and interdependent.  From a western view, reality shapes the mind, but from an eastern view, the mind also shapes reality.  If you make even a small allowance for this notion, it means that the computers in our heads can’t entirely govern our destinies.

There’s some value in both views of reality.  But even if we confine ourselves to Western science, many studies suggest that you can hack your own brain and “rewire” it.  (This link is from Huffington Post, but it has a good list of links to more reputable sources.)  Example results from these studies include:

  • Permanent changes in levels and areas of brain activation in fMRI scans.
  • Changes in brain structure including new neurons and neural connections.
  • Changes in fundamental visual perception mechanisms and levels of attention.
  • Generation of high levels of gamma waves during loving-kindness meditation***.

And I’ve always found it interesting that in pretty much every cognitive bias experiment many subjects make choices that are inconsistent with the expected cognitive bias.  For example in Daniel Kahneman’s now famous book Thinking Fast and Slow, one of the first experiments described involves a math problem about the price of a bat and ball.  Kahneman reports that more than 50% of the subjects from three Ivy League schools got the problem wrong, presumably due to an innate cognitive bias.  But that means nearly 50% of the same group were able to somehow override the expected bias and get the correct answer.  You could quibble that this might be due to flaws in the design or implementation of the experiment, but these types of experiments never yield uniform responses.  To whatever extent these cognitive biases are innate, it seems just as clear that some people don’t exhibit them or exhibit them only in certain circumstances.

Both the study of meditation and cognitive biases makes it clear that any “hard wiring” in our brains is both adaptable with practice and variable between people.  And I’d wager that no scientist yet fully understands the extent to which many or most people can alter apparently innate behaviors, like investing worries, through conscious effort.

Conclusion

Our starting question was whether we can avoid “most” of our investing worries through mindfulness.  “Most” can be defined as “almost all” or simply “the majority” (more than half).  Given all the evidence, it seems reasonable to me that mindfulness could help most people meet the “majority” test and reduce their investing worries by more than half.  In my own personal experience, I can comfortably claim to have dispensed with “almost all” my investing worries.

But in another sense, Seawright skepticism is entirely reasonable.  If you’re a financial adviser, mindfulness probably holds little hope of substantially reducing the collective worries of your customers.  After all, how many people walking through an adviser’s office door are actually going to take the advice to start diligently meditating each day?  Probably not many.

However, this blog is for individual (and mostly do-it-yourself) investors.  We’re not in the business of managing other people’s money.  We’re engaged in a very personal enterprise entirely for ourselves, whether that’s achieving financial independence, retiring early, or retiring comfortably.  There’s only one person you have to convince to meditate daily, and that’s you.  And you’re the only one who will reap any of the resulting benefits.  So, why not try daily meditation for a few months?  You have little to lose and much to potentially gain.  As busy as our society feels, most people can easily swap something inconsequential like watching television or surfing the internet for a half hour of meditation.

Given everything I’ve detailed here, maybe substantially reducing your investing worries is easier than you’ve assumed.  Given some regular (but not particularly difficult) daily practice, isn’t it possible that you could worry much less about the latest stock market gyrations?  Maybe the ironic truth is that we could all put more thought into putting our worries to rest.


*For the record, I’m not a professional adviser and I’ve never made a dime from the Mindfully Investing website.

**Forgive me sports fans, but I think in your heart-of-hearts you know that only hurt pride or brief elation hangs in the balance of the next game.  And that can be great fun! 

***Loving-kindness meditation is one mindfulness technique, where you focus on compassion and empathy for others and yourself.

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